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Posted September 22nd, 2010 by Charles Purdy

EUR/GBP Rate & Comments for 22nd September 2010

EUR/GBP – 1.177

Sterling fell to a 2 month low against the euro yesterday after stronger than expected demand for Irish and Greek government bonds eased concerns over European sovereign debt. Ireland sold 100% of the 1.5bn worth of bonds on offer and Greece managed to sell 390m worth of bonds – 72% of what was on offer. This saw sterling hit a low of 1.1810/£1 as the single currency surged on the strong sentiment that was generated by the bond auction. Sterling wasn’t helped after data was released showing that UK public sector borrowing hit a record high for August as interest payouts on UK government bonds shot up as a result of stubbornly high inflation. The data showed that the UK public sector spent £15.3bn more last month than it took in. In terms of today, there is yet more risk that sterling will drop in the form of the minutes of the Bank of England’s recent interest rate meeting. With concerns that the Bank are considering further Quantitative Easing, investors are keen to cast an eye over the discussions and thoughts of the decision makers. Speak to a trader now to protect yourself against further movements.

In the Euro zone, there were concerns last week over the debt crisis in Europe, as rumours spread that Ireland was seeking help from the International Monetary Fund (IMF). These were quickly allayed yesterday as the bond markets gave the emerald isle a vote of confidence by snapping up the bonds that were on offer. Greece also surprised many, and despite only selling 72% of the bonds that were on offer, this was seen as a huge step towards recovering some confidence in the financial markets. Out later today there is some business sentiment data for Belgium which is unlikely to cause too much of a stir. Speak to a trader now as the euro is likely to remain volatile – especially vs. sterling and the US dollar.

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